UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to __________

Commission file number: 001-41957

WETOUCH TECHNOLOGY INC.

(Exact name of registrant as specified in its charter)

Nevada		20-4080330
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

No. 29, Third Main Avenue Shigao Town, Renshou County Meishan, Sichuan, China		620500
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (86) 28-37390666

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, $0.001 par value per share		WETH		Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒

As of October, 07, 2025, there were 11,931,534 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding.

WETOUCH TECHNOLOGY INC.

QUARTERLY REPORT ON FORM 10-Q

	TABLE OF CONTENTS	Page Number

	Cautionary Note Regarding Forward Looking Statements	ii
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 (Unaudited)	F-1
	Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months Ended March 31 2025 and 2024 (Unaudited)	F-2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	F-3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	F-4
	Notes to Condensed Consolidated Financial Statements	F-5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4.	Controls and Procedures	9

PART II	OTHER INFORMATION	12
Item 1.	Legal Proceedings	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	12
Item 3.	Defaults Upon Senior Securities	12
Item 4.	Mine Safety Disclosures	12
Item 5.	Other Information	12
Item 6.	Exhibits	13
	Signatures	14

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be preceded by, or contain, words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “predict,” “potential,” “might,” “could,” “would,” “should” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, without limitation, statements about our future business operations and results, our strategy and competition. These statements represent our current expectations or beliefs concerning various future events and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations, including, but not limited to:

●

Our reliance on our top customers is significant. Failure to attract new customers or retain existing ones cost-effectively could materially and adversely impact our business, financial condition, and results of operations.

●

We hold a substantial amount of accounts receivable, which may become uncollectible.

●

We face fines and penalties from the Chinese government for not completing required filings.

●

Our capacity to uphold the quality and safety standards of our products.

●

Our ability to compete effectively within the touchscreen display industry.

●

Without substantial additional financing, our ability to execute our business plan will be compromised.

●

Failure to secure a new parcel for constructing our new buildings and facilities, as well as acquiring and installing new production lines on the new parcel, could materially and adversely affect our business, financial condition, and results of operations.

●

Revocation or unavailability of preferential tax treatments and government subsidies, or successful challenges to our tax liability calculation by PRC tax authorities, may necessitate payment of tax, interest, and penalties exceeding our tax provisions.

●

Significant interruptions in the operations of our third-party suppliers could potentially disrupt our operations.

●

Risks associated with fluctuations in the cost, availability, and quality of raw materials may adversely affect our results of operations.

●

We are reliant on key executives and highly qualified managers, and retention cannot be assured.

●

Absence of long-term contracts with our suppliers allows them to reduce order quantities or terminate sales to us at any time.

●

Failure to adopt new technologies to evolving customer needs or emerging industry standards may materially and adversely affect our business.

●

Lack of business liability or disruption insurance exposes us to significant costs and business disruption.

●

Adverse regulatory developments in Mainland China may subject us to additional regulatory review, restrictions, disclosure requirements, and regulatory scrutiny by the SEC, increasing compliance costs and hindering future securities offerings.

●

Our common stock may be prohibited from trading in the U.S. under the Holding Foreign Companies Accountable Act if PCAOB inspection of our auditor is incomplete, leading to delisting or prohibition and potential decline in stock value.

●

Changes in China’s economic, political, or social conditions or government policies may adversely affect our business and operations.

●

Uncertainties regarding the PRC legal system, including enforcement and sudden changes in laws and regulations, could adversely affect us and limit legal protections.

●

Fluctuations in exchange rates could materially and adversely affect our results of operations and your investment value.

●

The other risks and uncertainties discussed under the section titled “Risk Factors” beginning on page 12 of this Quarterly Report and our other filings with the Securities and Exchange Commission.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We undertake no obligation to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Quarterly Report with the understanding that our actual future results may be materially different from what we expect. We qualify all of the forward-looking statements in the foregoing documents by these cautionary statements.

iii

Item 1. Financial Statements

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets at March 31, 2025 and December 31, 2024 (Unaudited)	F-1

Condensed Consolidated Statements of Income and Comprehensive Income (Loss) for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	F-2

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	F-3

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 and 2024 (Unaudited)	F-4

Notes to Condensed Consolidated Financial Statements	F-5 - F-22

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2025			December 31, 2024
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	106,407,564		$	103,760,324
Accounts receivable, net		11,101,555			7,504,630
Inventories		146,625			112,327
Prepaid expenses and other current assets		2,167,153			2,762,580
TOTAL CURRENT ASSETS		119,822,897			114,139,861

Property, plant and equipment, net		12,855,562			12,782,997
Operating right-of-use assets		952,398			1,055,208
Deferred tax assets		47,035			41,397
TOTAL ASSETS	$	133,677,892		$	128,019,463

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,594,777		$	1,263,981
Due to a related party		400,513			149,211
Income tax payable		1,290,822			-
Accrued expenses and other current liabilities		1,558,615			966,461
Operating lease liabilities- current		599,654			571,539
TOTAL CURRENT LIABILITIES		5,444,381			2,951,192

Operating lease liabilities- non current		352,744			482,606
TOTAL LIABILITIES	$	5,797,125		$	3,433,798

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 15,000,000 shares authorized, 11,931,534 and 9,732,948 issued and outstanding as of March 31, 2025 and December 31, 2024, respectively*	$	11,932		$	11,932
Additional paid in capital*		52,501,680			52,501,680
Statutory reserve		8,073,968			8,073,968
Retained earnings		77,192,096			74,629,374
Accumulated other comprehensive loss		(9,898,909	)		(10,631,289	)
TOTAL STOCKHOLDERS’ EQUITY		127,880,767			124,585,665
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	133,677,892		$	128,019,463

Retrospectively restated for effect of reverse stock split (1-for-20), see Note 11 (2)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE LOSS

(Unaudited)

	For the Three Months Ended March 31,
	2025			2024
	(Unaudited)			(Unaudited)
REVENUES	$	15,289,578		$	14,877,259
Cost of revenues		(9,647,947	)		(11,539,301	)
GROSS PROFIT		5,641,631			3,337,958

OPERATING EXPENSES
Selling expenses		(102,457	)		(459,792	)
General and administrative expenses		(1,566,440	)		(530,524	)
Research and development expenses		-			(42,738	)
Total operating expenses		(1,668,897	)		(1,033,054	)

INCOME FROM OPERATIONS		3,972,734			2,304,904

OTHER INCOME (EXPENSES)

Interest income		61,094			31,347
Interest expense		-			(1,169,974	)
Other income		-			46,620
Gain on changes in fair value of common stock purchase warrants liability		-			7,821
TOTAL OTHER INCOME (EXPENSES)		61,094			(1,084,186	)

INCOME BEFORE INCOME TAX EXPENSE		4,033,828			1,220,718

INCOME TAX EXPENSE		(1,471,106	)		(661,848	)

NET INCOME	$	2,562,722		$	558,870

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment		732,380			(1,929,993	)
COMPREHENSIVE INCOME (LOSS)	$	3,295,102		$	(1,371,123	)

EARNINGS PER COMMON SHARE
Basic	$	0.21		$	0.04
Diluted	$	0.21		$	0.04

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING*
Basic		11,931,534			13,342,294
Diluted		11,931,534			13,392,999

*	Retrospectively restated for effect of reverse stock split (1-for-20), see Note 11 (2)

The accompanying notes are an integral part of these consolidated financial statements.

F-2

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Common stock at Par value $0.001				Additional paid-in		Statutory		Retained		Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital		reserve		Earnings		loss			equity

Balance as of December 31 2024		11,931,534	$	11,932	$	52,501,680	$	8,073,968	$	74,629,374	$	(10,631,289	)	$	124,585,665

Net income		-		-		-		-		2,562,722		-			2,562,722
Foreign currency translation adjustment		-		-		-		-		-		732,380			732,380

Balance as of March 31, 2025		11,931,534	$	11,932	$	52,501,680	$	8,073,968	$	77,192,096	$	(9,898,909	)	$	127,880,767

	Common stock at Par value $0.001				Additional paid-in			Statutory		Retained		Accumulated other comprehensive			Total stockholders’
	Shares		Amount		capital			reserve		Earnings		loss			equity

Balance as of December 31 2023*		9,732,948	$	9,733	$	43,514,125		$	7,195,092	$	69,477,092	$	(7,275,432	)	$	112,920,610

Issuance of common stock from the 2024 Public Offering, net of issuance costs		2,160,000		2,160		8,987,594			-		-		-			8,989,754
Exercise of warrants issued in conjunction with legal/consultant services in 2020 and 2021		35,861		36		(36	)		-		-		-			-

Exercise of warrants issued to third parties in conjunction with debt issuance in 2021		2,725		3		(3	)		-		-		-			-
Net income		-		-		-			-		558,870		-			558,870
Foreign currency translation adjustment		-		-		-			-		-		(1,929,993	)		(1,929,993	)

Balance as of March 31, 2024		11,931,534	$	11,932	$	52,501,680		$	7,195,092	$	70,035,962	$	(9,205,425	)	$	120,539,241

*	Retrospectively restated for effect of reverse stock split (1-for-20), see Note 11 (2)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Three Months Ended March 31,
	2025			2024
	(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	2,562,722		$	558,870
Adjustments to reconcile net income to cash provided by (used in) operating activities
Allowance for credit loss		45,739			-
Reversal of provision for obsolete inventory		(25,276	)		-
Depreciation		2,471			2,316
Amortization of discounts and issuance cost of the notes		-			5,715
Amortization of operating Right-of-use assets		156,014			-
(Gain) on changes in fair value of common stock purchase warrants liability		-			(7,821	)

Changes in operating assets and liabilities:
Accounts receivable		(3,545,017	)		(3,622,872	)
Inventories		(8,289	)		32,939
Prepaid expenses and other current assets		554,764			(3,429,690	)
Deferred tax assets		(5,383	)		-
Accounts payable		322,661			(64,222	)
Amounts due to related parties		250,959			-
Income tax payable		1,290,429			661,848
Accrued expenses and other current liabilities		589,309			(3,354,627	)
Operating lease liabilities		(151,375	)		-
Net cash provided by (used in) operating activities		2,039,728			(9,217,544	)

Cash flows from investing activities

Purchase of property, plant and equipment		-			(111,289	)
Net cash used in investing activities		-			(111,289	)

Cash flows from financing activities
Proceeds from issuance of common stock, net of issue costs		-			8,989,754
Repayment of interest-free advances to a third party		-			(82,864	)
Repayments of convertible promissory notes payable		-			(1,400,750	)
Net cash provided by financing activities		-			7,506,140

Effect of changes of foreign exchange rates on cash		607,513			(1,421,411	)
Net increase (decrease) in cash		2,647,238			(3,244,104	)
Cash, beginning of period		103,760,324			98,040,554
Cash, end of period	$	106,407,562		$	94,796,450
Supplemental disclosures of cash flow information
Interest paid	$	-		$	1,186,210
Issue costs charged to additional paid-in capital	$	-		$	1,810,246
Exercise of warrant shares	$	-		$	38,586
Lease liabilities arising from obtaining right-of-use assets	$	47,251		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

WETOUCH TECHNOLOGY INC. AND ITS SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS DESCRIPTION

Wetouch Technology Inc. (“Wetouch”, or the “Company”), formerly known as Gulf West Investment Properties, Inc., was originally incorporated in August 1992, under the laws of the state of Nevada.

On October 9, 2020, the Company entered into a share exchange agreement (the “Share Exchange Agreement”) with Wetouch Holding Group Limited (“BVI Wetouch”) and all the shareholders of BVI Wetouch (each, a “BVI Shareholder” and collectively, the “BVI Shareholders”), to acquire all the issued and outstanding capital stock of BVI Wetouch in exchange for the issuance to the BVI Shareholders an aggregate of 28,000,000 shares (1,400,000 shares post-Reverse Stock Split) of the Company’s common stock (the “Reverse Merger”). In the Reverse Merger, each ordinary share of BVI Wetouch was exchanged for 2,800 shares (140 shares post-Reverse Stock Split) of common stock of Wetouch. Immediately after the closing of the Reverse Merger on October 9, 2020, the Company had a total of 31,396,394 (1,569,820 shares post-Reverse Stock Split) issued and outstanding shares of common stock. As a result of the Reverse Merger, BVI Wetouch became a wholly-owned subsidiary of the Company.

BVI Wetouch is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Sichuan Wetouch Technology Co., Ltd. (“Sichuan Wetouch”), a limited liability company organized under the laws of the People’s Republic of China (“China” or the “PRC”). Sichuan Wetouch is primarily engaged in the business of research and development, manufacture, and distribution of touchscreen displays to customers both in the PRC and overseas. The touchscreen products, which are manufactured by the Company, are primarily for use financial terminals, automotive, Point of Sales, gaming, lottery, medical, Human-Machine Interface (HMI), and other specialized industries.

The Reverse Merger was accounted for as a recapitalization effected by a share exchange, wherein BVI Wetouch is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of BVI Wetouch have been brought forward at their book value and no goodwill has been recognized. The number of shares, par value amount, and additional paid-in capital in the prior years are retrospectively adjusted accordingly.

Corporate History of BVI Wetouch

BVI Wetouch was incorporated under the laws of British Virgin Islands on August 14, 2020. It became the holding company of Hong Kong Wetouch Electronics Technology Limited (“Hong Kong Wetouch”) on September 11, 2020.

Hong Kong Wetouch Technology Limited (“HK Wetouch”), was incorporated as a holding company under the laws of Hong Kong Special Administrative Region (the “SAR”) on December 3, 2020. On March 2, 2021, HK Wetouch acquired all shares of Hong Kong Wetouch. Due to the fact that Hong Kong Wetouch and HK Wetouch are both under the same sole stockholder, the acquisition is accounted for under common control.

In June 2021, Hong Kong Wetouch completed its dissolution process pursuant to the minutes of its special stockholder meeting.

Sichuan Wetouch was formed on May 6, 2011 in the PRC and became a Wholly Foreign-Owned Enterprise (“WFOE”) in PRC on February 23, 2017. On July 19, 2016, Sichuan Wetouch was 100% held by HK Wetouch.

On December 30, 2020, Sichuan Vtouch was incorporated in Chengdu, Sichuan, under the PRC laws.

F-5

In March 2021, pursuant to local PRC government guidelines on local environmental issues and the national plan, Sichuan Wetouch was under the government directed relocation order. Sichuan Vtouch took over the operating business of Sichuan Wetouch.

On March 30, 2023, an independent third party acquired all shares of Sichuan Wetouch for a nominal amount.

As a result of the above restructuring, HK Wetouch became the sole stockholder of Sichuan Vtouch.

The following diagram illustrates the Company’s current corporate structure:

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the United States Securities and Exchange Commission (the “SEC”). The condensed consolidated balance sheet as of December 31, 2024 was derived from the audited consolidated financial statements of Wetouch. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2024, and the related consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended.

In the opinion of the management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the financial position as of March 31, 2025, the results of operations and cash flows for the three-month periods ended March 31, 2025 and 2024 have been made. However, the results of operations included in such financial statements may not necessarily be indicative of annual results.

F-6

Deconsolidation of Sichuan Wetouch

On March 30, 2023, upon transferring Sichuan Wetouch to a third-party individual for a nominal value, the Company was no longer able to operate and exert control over this subsidiary whose operation has been taken over by Sichuan Vtouch since the first quarter of 2021. As a result, Sichuan Wetouch was deconsolidated accordingly since the disposal date.

The deconsolidated Sichuan Wetouch had assets, liabilities and the non-controlling interest on disposal date as the following:

	March 30, 2023
Total assets as of deconsolidated date	$	-
Total liabilities as of deconsolidated date		-
Total gain or loss from deconsolidation	$	-

Upon the deconsolidation, the Company was no longer entitled to the assets and also legally released from the liabilities previously held by the deconsolidated Sichuan Wetouch, derived nil gain or loss from the deconsolidation in the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2023. The disposal of Sichuan Wetouch did not represent a strategic shift and did not have a major effect on the Company’s operation. There was no cash outflow for the disposal for the three months ended March 31, 2023.

(b) Uses of Estimates

In preparing the consolidated financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on information as of the date of the consolidated financial statements. Significant estimates required to be made by management include, but are not limited to, the allowance for estimated uncollectible receivables, fair values of financial instruments, inventory valuations, useful lives of property, plant and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities, revenue recognition and realization of deferred tax assets. Actual results could differ from those estimates.

(c) Significant Accounting Policies

For a detailed discussion about Wetouch’s significant accounting policies, refer to Note 2 — “Summary of Significant Accounting Policies,” in Wetouch’s consolidated financial statements included in Company’s 2024 audited consolidated financial statements. Other than the revised accounting policies on lease and segment reporting as below, during the three-month periods ended March 31, 2025, there were no significant changes made to Wetouch significant accounting policies.

F-7

Lease

The Company adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”) for all periods presented. The Company elected the short-term lease exemption for all contracts with lease terms of 12 months or less.

Under the guidance of ASU 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.

The Company’s lease terms include options to renew or terminate the lease when it is reasonably certain that it will exercise the option. The Company determines if a contract contains a lease based on whether it has the right to obtain substantially all of the economic benefits from the use of an identified asset that the Company does not own and whether it has the right to direct the use of an identified asset in exchange for consideration. Right of use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are recognized as the amount of the lease liability, adjusted for lease incentives received. Lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the Company’s incremental borrowing rate (“IBR”), because the interest rate implicit in most of the Company’s leases is not readily determinable. The IBR is a hypothetical rate based on the Company’s understanding of what its credit rating would be and the resulting interest it would pay to borrow an amount equal to the lease payments in a similar economic environment over the lease term on a collateralized basis. Lease payments may be fixed or variable, however, only fixed payments or in-substance fixed payments are included in the Company’s lease liability calculation. Variable lease payments are recognized in operating expenses in the period in which the obligation for those payments is incurred.

The lease right-of-use assets are initially measured at the carrying amount of the lease liability and adjusted for any prepaid or accrued lease payments, remaining balance of lease incentives received, unamortized initial direct costs, or impairment charges relating to the right-of-use-asset. Lease expense for minimum lease payments exclusive of value-added tax is recognized on a straight-line basis over the lease term The new standard provides a number of optional practical expedients at transition. The Company elected certain practical expedients that must be elected as a package, which permit the Company to not reassess, under the new standard, prior conclusions about (1) lease identification, (2) lease classification and (3) initial direct costs. Additionally, the Company elected a short-term lease exception policy, which allows entities to not apply Topic 842 to short-term leases (i.e. leases with terms of 12 months or less) and a hindsight policy, which allows an entity to include current considerations for existing leases when determining initial lease terms. The Company has also elected to account for lease and non-lease components as a single component for all leases and elected to utilize an IBR (incremental borrowing rate) that equals the risk free rate plus premium for all leases when calculating the lease liability.

Segment reporting

In accordance with ASC 280, Segment Reporting, operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) or decision-making group, in deciding how to allocate resources and in assessing performance. The Company evaluated its portfolio of service to determine whether certain services exhibit similar characteristics, such that they should be grouped together in the Company’s disclosure. The Company derives revenue primarily from projects performed under: (i) master and general service contract with customers for electric power supply solutions, mainly for the design and installation of low voltage outlet cable and bridge, power distribution box and electric vehicle power station; (2) installation of power wires, power poles and electricity distribution equipment and facilities for power supply system upgrade for both residential and commercial projects. The Company’s services have similar economic characteristics with respect to construction project nature, raw materials and supplies to be used in the projects, vendors, marketing and promotions, customers and methods of distribution. The Company’s chief operating decision maker (“CODM”) has been identified as the Chief Executive Officer (“CEO”), who reviews consolidated results when making decisions about allocating resources and assessing performance of the Company. The CODM confers regularly to review trends in operating metrics, revisit, assess, and adjust significant strategic and operational matters, and make resource adjustments as needed. These discussions include exploring opportunities for project acquisition, responding immediately and effectively to operational adjustments, aligning ongoing business activities with corporate-level objectives, improving customer satisfaction, and enhancing corporate culture, among other management concerns. The primary measure of segment revenue and profitability for the Company’s operating segment is considered to be consolidated revenue and net income. Certain financial information, such as revenue, can be disaggregated, whereas cost of revenues, selling and marketing expenses, general and administrative expenses, research and development expenses and other income (expenses), are mixed and not disaggregated. Hence, with respect to costs of revenues and operating expenses and other income (expenses), no discrete financial information beyond the consolidated results is prepared and presented to the CODM.

As all of the Company’s assets are all located in the PRC, no geographical segment information of assets is presented. The CODM does not review any information regarding total assets on a reportable segment basis. Through the evaluation, the CODM determined that the Company has only one reporting segment.

F-8

Recent accounting pronouncements

On November 27, 2023, FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in ASU 2023-07 are required to be adopted for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

On December 14, 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires that entities disclose specific categories in their rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. The new standard is effective for the Company beginning December 15, 2024, with early adoption permitted effective for fiscal years beginning January 1, 2024. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires the disaggregation of certain expense captions into specified categories in disclosures within the notes to the consolidated financial statements to provide enhanced transparency into the expense captions presented on the face of the statement of income and comprehensive income. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, with early adoption permitted, and may be applied either prospectively or retrospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or retrospectively to any or all prior periods presented in the financial statements. On January 6, 2025, FASB issued ASU 2025-01 that clarifies for non-calendar year-end entities the interim effective date of Accounting Standards Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. Public business entities are required to adopt the guidance in Update 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact that the adoption of ASU 2024-03 will have on its related disclosures.

In March 2025, the FASB issued ASU 2025-02—Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. The amendments in this Update are effective immediately and on a fully retrospective basis to annual periods beginning after December 15, 2024. The Company is currently evaluating the effect of adoption of this standard to its consolidated financial statements and disclosures.

Other accounting standards that have been issued by FASB that do not require adoption until a future date are not expected to have a material impact on the unaudited condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on, or are unrelated to, its unaudited condensed consolidated financial condition, results of operations, cash flows or disclosures.

F-9

NOTE 3 — ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

	March 31, 2025		December 31, 2024
	(Unaudited)
Accounts receivable	$	11,101,555	$	7,504,630
Allowance for credit losses		-		-
Accounts receivable, net	$	11,101,555	$	7,504,630

The Company’s accounts receivable primarily includes balance due from customers when the Company’s products are sold and delivered to customers.

The following table provides an analysis of the aging of accounts receivable as of March 31, 2025 and December 31, 2024:

	March 31, 2025		December 31, 2024
		(Unaudited)
Current	$	4,365,438	$	3,726,124
1-3 months past due		5,828,772		2,536,815
4-6 months past due		907,345		1,241,691
Total accounts receivable	$	11,101,555	$	7,504,630

NOTE 4 — PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

	March 31, 2025		December 31, 2024
		(Unaudited)
Advance to suppliers	$	210,757	$	252,618
Issuance cost related to convertible promissory notes		-		-
Prepayment for land use right (i)		540,912		537,755
Security deposit (ii)		54,157		53,840
Prepaid consulting service fees (iii)		357,390		884,687
Prepaid market research fees (iv)		955,000		955,000
Others receivable (v)		48,937		78,680
Prepaid expenses and other current assets	$	2,167,153	$	2,762,580

(i)

On July 23, 2021, Sichuan Vtouch entered into a contract with Chengdu Wenjiang District Planning and Natural Resources Bureau for the purchase of a land use right of a parcel of land of 131,010 square feet for a consideration of RMB3,925,233 (equivalent to $540,912) for the Company’s new facility. The Company paid the consideration in full by November 18, 2021. Upon issuance of a certificate of land use right by the local government, which is estimated to be obtained by the second half of 2026, the Company will reclassify this prepayment to intangible assets accordingly.

(ii)	On July 28, 2021, Sichuan Vtouch made a security deposit of RMB393,000 (equivalent to $54,157) to Chengdu Cross-Strait Science and Technology Industry Development Park Management Committee to obtain a construction license for its new facility. This deposit will be refunded upon the issuance of the construction license, which is expected to be by the second half of 2025.

(iii)	In May 2023, the Company entered into two third-party consulting service agreements for a fee of $1.35 million and $3.1 million, respectively, for the three-year consulting services. The total fee would be amortized over the three-year services and reclassified to stock issuance costs accordingly. As of March 31, 2025, the Company recognized $357,390 for this prepaid consulting service fees within one year.

(iv)	On February 29, 2024, the Company advanced market research fees $70,000 and $855,000, respectively, to two unrelated individuals, Mr. Chien Hui Chueh and Mr. Cheung Ming Lin, in relation to the Company’s market research service overseas. The two individuals signed borrowing contracts with a principal amount of $70,000 and $855,000, respectively, on February 29, 2024. Those contracts were issued to the Company to evidence the advances, bearing 3.45% interest per annum, and payable on February 28, 2025, and extended till August 29, 2026.

(v)	Other receivables are mainly employee advances, and prepaid expenses.

F-10

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT, NET

	March 31, 2025			December 31, 2024
		(Unaudited)
Buildings	$	11,868		$	11,798
Machinery and equipment		7,716			7,672
Vehicles		40,350			40,114
Construction in progress		12,830,673			12,755,791
Subtotal		12,890,607			12,815,375
Less: accumulated depreciation		(35,045	)		(32,378	)
Property, plant and equipment, net	$	12,855,562		$	12,782,997

Depreciation expense was $2,471 and $2,316 for the three-month period ended March 31, 2025 and 2024, respectively

As of March 31, 2025, the Company had commitment of RMB5.0 million (equivalent to $0.7 million) for construction in progress of our new facility.

NOTE 6 — OPERATING LEASE

In March 2021, pursuant to the local PRC government guidelines on local environmental issues and the national plan, the Company was under the government directed relocation order to relocate from a parcel of state-owned land where we maintained our executive offices, research and development facilities and factories. The Company received a total amount of RMB115.2 million (approximately $17.7 million) from the local government (see ITEM 2. PROPERTIES AND FACILITIES) to start the construction of the new facility in a neighboring Chengdu Wenjiang District.

On March 16, 2021, in order to minimize interruption of the Company’s business, Sichuan Vtouch entered into a leasing agreement with Sichuan Renshou Shigao Tianfu Investment Co., Ltd. (later renamed as Meishan Huantian Industrial Co., Ltd.), a limited liability company owned by the local government, to lease the property, and all buildings, facilities and equipment thereon (the “Demised Properties) of Sichuan Wetouch, commencing from April 1, 2021 until December 31, 2021 at a monthly rent of RMB300,000 ($41,100), which period was extended to October 31, 2022. The lease was renewed on October 30, 2022, October 30, 2023 and August 9, 2024, respectively, with a monthly rent of RMB 400,000 ($54,800), the term of which has been extended to October 31, 2025 for the use of the Demised Properties.

The Company’s new facility started in August 2021 yet was delayed and suspended due to the outbreak of Covid-19 and government-ordered shutdowns in China. The Company has rescheduled and extended the completion by end of December 31, 2025 with the production at the new facilities will commencing in the second quarter of 2026. For the three months ended March 31, 2025, management makes estimates and assumptions to use the leasing property till the end of October 2026, and applies ASU 2016-02 “Leases (Topic 842) as practical expedients during the three months ended March 31, 2025.

Both operating lease expense and short-term lease expense are recognized in cost of revenues and general and administrative expenses.

The components of lease expense for the three months ended March 31, 2025 and 2024 were as follows:

	For the Three Months Ended March 31,
	2025		2024
Lease expense		(Unaudited)		(Unaudited)
Operating lease expense	$	151,375	$	-
Short-term lease expense		-		147,729
Total lease expense	$	151,375	$	147,729

F-11

The balances for the operating leases where the Company is the lessee are presented as follows:

	March 31, 2025		December 31, 2024
		(Unaudited)
Operating lease right-of-use assets	$	952,398	$	1,055,208
Lease liabilities – current		599,654		571,539
Lease liabilities – non-current		352,744		482,606
Total operating lease liabilities	$	952,398	$	1,054,145

The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2025:

	Operating lease
	(Unaudited)
2025 lease payment (from April 1, 2025 to December 31, 2025)	$	455,131
2026 lease payment		497,267
Less: imputed interest		-
Present value of lease liabilities	$	952,398

Lease term and discount rate:

	For the Three Months Ended March 31,
	2025			2024
Weighted-average remaining lease term (years)	(Unaudited)
Operating lease		1.6			-

Weighted-average discount rate
Operating lease		1.09	%		-

Supplemental cash flow information related to leases where the Company was the lessee for the three months ended March 31, 2025 was as follows:

	For the Three Months Ended March 31,
	2025		2024
	(Unaudited)
Cash payments for operating lease	$	151,375	$	-
Lease liabilities arising from obtaining right-of-use assets		47,251		-

F-12

NOTE 7 — RELATED PARTY TRANSACTIONS

Amounts due to a related party are as follows:

	Relationship	March 31, 2025		December 31, 2024		Note
			(Unaudited)
Chengdu Wetouch Intelligent Optoelectronics Co., Ltd.	Affiliate of Ms. Jiaying Cai, director of the Company	$	400,513	$	149,211	Payable to affiliate for expenses paid on behalf of the Company

Total		$	400,513	$	149,211

Chengdu Wetouch Intelligent Optoelectronics Co., Ltd., was incorporated on December 30, 2020 in Chengdu, Sichuan Province under the laws of PRC, with Ms. Jiaying Cai, a director of the Company as its sole shareholder holding 100% of its equity interests.

NOTE 8 — INCOME TAXES

Wetouch

Wetouch is subject to a tax rate of 21% per beginning 2018, and files a U.S. federal income tax return.

BVI Wetouch

Under the current laws of the British Virgin Islands, BVI Wetouch, a wholly owned subsidiary of Wetouch, is not subject to tax on its income or capital gains. In addition, no British Virgin Islands withholding tax will be imposed upon the payment of dividends by the Company to its shareholders.

Hong Kong

HK Wetouch is subject to profit taxes in Hong Kong at a progressive rate of 16.5%.

PRC

Sichuan Wetouch and Sichuan Vtouch files income tax returns in the PRC. Effective from January 1, 2008, the PRC statutory income tax rate is 25% according to the Corporate Income Tax (“CIT”) Law which was passed by the National People’s Congress on March 16, 2007.

Under PRC CIT Law, domestic enterprises and foreign investment enterprises (the “FIEs”) are usually subject to a unified 25% enterprise income tax rate while preferential tax rates, tax holidays and even tax exemption may be granted on a case-by-case basis by local government as preferential tax treatment to High and New Technology Enterprises (the “HNTEs”). Under this preferential tax treatment, HNTEs are entitled to an income tax rate of 15%, subject to a requirement that they re-apply for their HNTE status every three years. Pursuant to an approval from the local tax authority in October 2017, Sichuan Wetouch became a qualified enterprise located in the western region of the PRC, entitled it to a preferential income tax rate of 15% from October 11, 2017 to October 11, 2020.

On October 21, 2020, Sichuan Wetouch was granted on a case-by-case basis by Sichuan Provincial government as an HNTE , entitled to a reduced income tax rate of 15% from October 21, 2020 until October 20, 2023.

F-13

Sichuan Vtouch is subject to a 25% income tax rate.

The CIT Law and its implementation rules impose a withholding income tax at 10%, unless reduced by a tax treaty or arrangement, on the amount of dividends distributed by a PRC-resident enterprise to its immediate holding company outside the PRC that are related to earnings accumulated beginning on January 1, 2008. Dividends relating to undistributed earnings generated prior to January 1, 2008 are exempt from such withholding income tax.

The Company’s provision for income taxes credit (expenses) consisted of:

	For the Three Months Ended March 31,
PRC income tax	2025			2024
	(Unaudited)
Income tax provision	$	1,476,488		$	661,848
Deferred income tax expenses		(5,382	)		-
Total	$	1,471,106		$	661,848

US		-			-
BVI		-			-
Hong Kong		-			-
Income tax provision	$	1,471,106		$	661,848

The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the three months March 31, 2025 and 2024:

	For the Three Months Ended March 31,
	2025			2024
	(Unaudited)
PRC statutory income tax rate		25.0	%		25.0	%
Income tax computed at PRC statutory corporate income tax rate of 25%		31.6	%		55.2	%
Tax rate differential on entities not subject to PRC income		(1.1	)%		(4.8	)%
R&D additional deduction		0.0	%		(0.9	)%
Change in valuation allowance		0.0	%		0.2	%
Temporary differences		(0.1	)%		1.4	%
Non-deductible expenses		6.1	%		3.1	%
Effective tax rate

SEC Form 10-Q filed by Wetouch Technology Inc.